The Dogecoin frenzy has exploded in the past several weeks, initiated by Tesla’s CEO Elon Musk. While numerous others also joined the “pro-dogecoin” narrative, including Snoop Dogg and the Winklevoss brothers, some crypto proponents, such as Changpeng Zhao and Mike Novogratz, outlined potential risks that could end “poorly” for investors.
The Shiba Inu-inspired token started out as a joke but has skyrocketed in popularity lately, mostly after receiving support from the CEO of Tesla and SpaceX – Elon Musk. The world’s richest man has repeatedly endorsed Dogecoin on Twitter, which resulted in immediate price pumps, and also garnered the attention of other prominent names.
Shortly after, the “pro-Dogecoin” narrative reached the likes of the famous US rapper Snoop Dogg and the founders of the crypto exchange, Gemini, Tyler, and Cameron Winklevoss. The latter referred to DOGE as “fun money” while taking a stab at the US dollar for being “funny money.”
Being endorsed by these prominent individuals, retail investors grasped the asset and started allocating funds to it. Moreover, some took it to social media platforms to brag about it.
Ultimately, this massive demand prompted a price boost for the asset. DOGE is up by nearly 30% in the past 24 hours and more than 100% in the past seven days. Furthermore, its market capitalization jumped to $10 billion and placed the meme token in the top 10 crypto coins by market cap.
Musk interfered again today by defending DOGE’s “not meaningful” inflationary mechanism, while slamming Bitcoin’s “arguably deflationary to a fault.”
Doge appears to be inflationary, but is not meaningfully so (fixed # of coins per unit time), whereas BTC is arguably deflationary to a fault.
Transaction speed of Doge should ideally be a few orders of magnitude faster.
— Elon Musk (@elonmusk) February 8, 2021
What Are The Risks?
Changpeng Zhao, the CEO of the popular crypto exchange Binance, also weighed in on the Dogecoin frenzy. However, he outlined some of the pros and cons that he sees regarding the asset.
From a positive perspective, DOGE is “fun and cool” and has a prominent PR manager – Elon Musk.
In contrast, though, he highlighted that the token is not exactly decentralized as about 27% of all coins in circulation are held in one address.
Galaxy Digital’s CEO Mike Novogratz took it a step further and warned the community that the ongoing DOGE craze “is gonna end poorly.” He compared the situation with Dogecoin with the recent developments with GameStop’s stock, which, eventually, plummeted by over 80% from the top.
Instead of focusing on such brief trends, Novogratz advised people to play it safe as they would be better off with buying BTC, ETH, and DeFi-related coins. He believes that this strategy is a much smarter way to “play this crypto rally.”